Capital allowance - Self Assessment - % saved?

Capital allowance - Self Assessment - % saved?

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Hello, 

I had a quick question in relation to Capital Allowances. 

I have just purchased a computer for business purposes through my Ltd company for £1900. If I am correct in my thinking we take this to the fixed assets register and then write it down over a 3 year period claiming capital allowance each year on the deprecation amount? If it was under £1000 we could have written down 100% by using the annual investment allowance scheme. Either way over the life time of the computer I would save 20% in a corp tax reduction. 

Now my question is this, if I was self-employed and I was completing my self-assessment and can already see that I am in a 40% income tax bracket would I potentially save 20% tax like the limited company above or would I be saving 40% as I am currently in the 40% income bracket. 

Hope some on can help. 

Jason 

Replies (5)

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Euan's picture
By Euan MacLennan
07th May 2014 13:37

Capital allowances

... are a deduction from your trading profits, so you get relief at whatever rate of tax you pay on your trading profits.

Why do you think that the 100% AIA can only be cliamed on capital expenditure of under £1,000?  It can be claimed on up to £500,000 of expenditure on plant and machinery (assuming that the Budget increase passes into law - £250,000 if not).

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By pedre
07th May 2014 15:09

Small pools allowance

Are you getting confused with the £1k small pool allowance?

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By jay22981
07th May 2014 17:01

Apologies think I got a little confused in my questioning as pedre mentioned. Scrap the whole investment under £1000 remark.. 

But can anyone confirm if I would save 40% under self-assessment and only 20% under Ltd.  I would be entirely grateful. 

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By S D
07th May 2014 17:19

Tax Savings - Self Assessment or through Ltd Company

Yes - assuming you have a company which pays tax at the small company's rate (20%) and the transaction is routed through the company.

If the transaction is routed through as a self employed individual, if you are on the higher tax rate say 40%, then your tax saving will be at 40% in the first year.(when you file a claim as part of your self assessment calculation).

Hope this helps

SD

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By jay22981
07th May 2014 17:29

Great thanks S D. 

Great thanks S D. 

Sorry I am very new to accounting and finding the rules really interesting. 

Do you now find it odd that I can save an extra 20% for the exact same thing if I claim the relief though a different means.

Jason

 

 

 

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